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![Page 1: Evaluating Potential Modernization of the Florida Tax System: Simulating Shifts In Productivity in the Florida Economy with Changes in the Exemptions and.](https://reader034.fdocuments.us/reader034/viewer/2022051620/56649f1c5503460f94c3266a/html5/thumbnails/1.jpg)
Evaluating Potential Modernization of the Florida Tax System:
Simulating Shifts In Productivity in the Florida Economy with Changes in the Exemptions and
the Incidence of State Taxes
Prepared by:
Tim Lynch, Ph.D., DirectorWith assistance from:
Carter Doyle, ABD, Economist
Center for Economic Forecasting and Analysis
Florida State Universitywww.cefa.fsu.edu
For: The Florida Tax Watch Center for a
Competitive Florida and the Task ForceOrlando Airport Hyatt Regency Hotel
December 12, 2002
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Using Regional Economic Models (REMI) to Measure
The Potential Economic Impacts on Productivity,
Employment and Wages from Shifts in the Structure of the State of Florida Tax System
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REMI Uses Three Sources of Employment, Wage and Salary Data
• The Bureau of Economic Analysis (BEA): Annual data and reported to county level.
• ES-202 Establishment employment and wage and salary data: Monthly data and to county level.
• County Business Patterns (CBP) data published by the Bureau of Census: Annual (March of each year) data.
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REMI Model(Five Basic Blocks)
• Output (Final Demands drive this block)• Labor and Capital Demands (Labor Demand)• Population and Labor Supply (Labor Supply)• Wages, Prices,and Profits• Market Shares (Share of Local and External
Markets)
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Recalling a Basic Economic Relationships
GDP = Investment + Personal Consumption
+ Government Spending + Net Exports
Hence, an INCREASE in industry (TAX EXEMPTIONS) or consumer taxes rates will:
1. INCREASE PRODUCTION COSTS AND SLOW the economy:
2. DECREASE CONSUMER SPENDING AND SLOW the economy;
3. BUT INCREASE GOVERNMENT SPENDING AND INCREASE the economy (but by how much on net??? This is to be answered on a case by case basis).
HOWEVER:
A general sales tax increase spread across all consumers and industries with an approximate 20% COLLECTION RATE FROM TOURISTS EXPORTS A LARGE CHUNK OF THE TAX and results in continuing to STIMULATE AND INCREASE the economy despite the dampening effects on Florida residents and industries identified above.
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ESTIMATING SHIFTS IN TAX REVENUES AND PRODUCTIVITY FROM REMOVING SELECT
SALES TAX EXEMPTIONS PER RANDY MILLER SUGGESTIONS
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FY 2002-03Short Description Annualized
MillionsCondominium recreational leases. $6.3Toll road charges. $44.1Movie theater concession rent. $1.6Highschool and college teams'stadium skyboxes $0.7Admissions to certain school and state events. $6.3Dues, fees, and admissions charged by non profit entities. $27.2Admissions paid by students for required sports or recreation. $4.7Super Bowl football tickets (impact only when held in Florida) -$0.6Governmental participation or sponsorsnip tees $16.0Tickets for certain non-profit theater, opera or ballet events. $1.6Law enforcement officers' protection services. $3.3Non-Prescription drugs. $167.8Bottled (except carbonated) Water $7.4Sales of U.S. and State flags. $1.7Laundry & Dry Cleaning Services $77.8Beauty & Barber Shops $64.9Cleaning and Pest Control - Residential $56.4Auto Towing and Other Non-repair Services $17.2Franchises, Royalties & Lisc./Holding & Oth r Invest. Offices $814.3Certain candy sold in vending machines by non-profit orgs. inst.PRIDE $1.3Up to $2.Om annual subsidy for certain professional sports teams. $16.5$2 million annual subsidy for Professional Golf Hall of Fame. $2.0$1 m annual subsidy for Intern'l Game Fish Association World Center $1.0
$1,339.5
ESTIMATED POTENTIAL REVENUE FROM REMOVING THE SALES TAX ON SELECT SERVICES
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REMOVAL OF SPECIFICALLY IDENTIFIED PROFESSIONAL AND PERSONAL SERVICES EXEMPTIONS AND AN INCREASE IN
GOVERNMENT SPENDING BY $1,339.5 MILLION
$(3.00)
$(2.00)
$(1.00)
$-
$1.00
$2.00
$3.00
Increase in Production Cost AND in Government Spending of $1,339.5 M
Increase in Professional and Personal Services Production Cost ONLY of $1,339.5 M
Increase in Government Spending ONLY of $1,339.5 M
BILLIONS 1996$
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ESTIMATED REVENUE FROM SALES TAX ON SERVICES
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REMOVAL OF PERSONAL SERVICES EXEMPTIONS AND INCREASE IN GOVERNMENT SPENDING BY $1,028 MILLION
$(3.00)
$(2.50)
$(2.00)
$(1.50)
$(1.00)
$(0.50)
$-
$0.50
$1.00
$1.50
$2.00
Increase in Production Cost and Increase in Govt. Spending of $1,028 M
Increase in Production Cost of $1,028 M
Increase in Govt. Spending of $1,028 M
BILLIONS 1992$
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REMOVAL OF PROFESSIONAL SERVICES EXEMPTIONS AND INCREASE IN GOVERNMENT SPENDING BY $2,128 MILLION
$(7.00)
$(6.00)
$(5.00)
$(4.00)
$(3.00)
$(2.00)
$(1.00)
$-
$1.00
$2.00
$3.00
$4.00
Increase in Production Cost and Increase in Govt. Spending of $2,128 MIncrease in Production Cost of $2,128 MIncrease in Govt. Spending of $2,128 M
BILLIONS 1992$
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REMOVAL OF BUSINESS SERVICES EXEMPTIONS AND DECREASE IN GOVERNMENT SPENDING BY $2,428 MILLION
$(8.0)
$(6.0)
$(4.0)
$(2.0)
$-
$2.0
$4.0
Increase in Production Cost and Increase in Govt. Spending of $2,428 MIncrease in Production Cost of $2,428 M
Increase in Govt. Spending of $2,428 M
BILLIONS 1992$
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REMOVAL OF FINANCIAL SERVICES EXEMPTIONS AND AN INCREASE IN GOVERNMENT SPENDING BY $3,344 MILLION
$(16)
$(14)
$(12)
$(10)
$(8)
$(6)
$(4)
$(2)
$-
$2
$4
$6
Increase in Production Cost and Increase in Govt. Spending of $3,344 MIncrease in Production Cost of $3,344 M
Increase in Govt. Spending of $3,344 M
BILLIONS 1992$
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REMOVAL OF MEDIA SERVICES EXEMPTIONS AND DECREASE IN GOVERNMENT SPENDING BY $701 MILLION
$(2.50)
$(2.00)
$(1.50)
$(1.00)
$(0.50)
$-
$0.50
$1.00
Increase in Production Cost and in Govt. Spending of $701 M
Increase in Production Cost of $701 M
Increase in Govt. Spending of $701 M
BILLIONS 1992$
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REMOVAL OF ENTERTAINMENT SERVICES EXEMPTIONS AND DECREASE IN GOVERNMENT SPENDING BY $258 MILLION
$(0.80)
$(0.60)
$(0.40)
$(0.20)
$-
$0.20
$0.40
Increase in Production Cost and in Govt. Spending of $258 M
Increase in Production Cost of $258 M
Increase in Govt. Spending of $258 M
BILLIONS 1992$
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REMOVAL OF CONSTRUCTION INDUSTRY EXEMPTIONS AND DECREASE IN GOVERNMENT SPENDING BY $1.28 BILLION ANNUALLY
$(6.00)
$(5.00)
$(4.00)
$(3.00)
$(2.00)
$(1.00)
$-
$1.00
$2.00
Increase in Production Cost and in Govt. Spending of $1,280 M
Increase in Production Cost of $1,280 M
Increase in Govt. Spending of $1,280 M
BILLIONS1992$
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REMOVAL OF INSTITUTIONAL SERVICES EXEMPTIONS AND DECREASE IN GOVERNMENT SPENDING BY $420 MILLION
$(1.50)
$(1.00)
$(0.50)
$-
$0.50
$1.00Increase in Production Cost and in Govt. Spending of $420 M
Increase in Production Cost of $420 M
Increase in Govt. Spending of $420 M
BILLIONS 1992$
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REMOVAL OF TRANSPORTATION SERVICES EXEMPTIONS AND DECREASE IN GOVERNMENT SPENDING BY $661 MILLION
$(2.00)
$(1.50)
$(1.00)
$(0.50)
$-
$0.50
$1.00
Increase in Production Cost and in Govt. Spending of $661 M
Increase in Production Cost of $661 M
Increase in Govt. Spending of $661 M
BILLIONS 1992$
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REMOVAL OF HEALTH SERVICES EXEMPTIONS AND INCREASE IN GOVERNMENT SPENDING BY $1.791 BILLION
$(7.00)
$(6.00)
$(5.00)
$(4.00)
$(3.00)
$(2.00)
$(1.00)
$-
$1.00
$2.00
$3.00
Increase in Production Cost and in Govt. Spending of $1,791 M
Increase in Production Cost of $1,791 M
Increase in Govt. Spending of $1,791 M
BILLIONS 1992$
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INCREASE IN FLORIDA SALES TAX AND CONSUMER TAX BURDEN BY $1% OR $2,781 MILLION (DIFFERENCES)
$(5.00)
$(4.00)
$(3.00)
$(2.00)
$(1.00)
$-
$1.00
$2.00
$3.00
$4.00
$5.00
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
Increase in Personal Tax Burden and Increase in Govt. Spending of $2,781 M
Increase in Personal Tax Burden of $2,781 M
Increase in Govt. Spending of $2,781 M
BILLIONS 1992$
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INCREASE IN FLORIDA SALES TAX AND CONSUMER TAX BURDEN BY 1% OR $2,781 MILLION (LEVELS)
$400
$450
$500
$550
$600
$650
$700
$750
$800
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
Increase in Personal Tax Burden and Increase inGovt. Spending of $2,781 MIncrease in Personal Tax Burden of $2,781 M
Increase in Govt. Spending of $2,781 M
BILLIONS 1992$
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INCREASE IN FLORIDA SALES TAX AND CONSUMER TAX BURDEN BY 1% OR $2,781 MILLION
(TEN YEAR FORECAST IN LEVELS)
$400
$420
$440
$460
$480
$500
$520
$540
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Increase in Personal Tax Burden and Increase in Govt. Spending of $2,781 M
Increase in Personal Tax Burden of $2,781 M
Increase in Govt. Spending of $2,781 M
BILLIONS OF 1992$
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SALES TAX 1% INCREASE WITH A $2,225 MILLION DECLINE IN FLA CONSUMER TAX BURDEN (TOURIST INCREASE 20%)
$(5.00)
$(4.00)
$(3.00)
$(2.00)
$(1.00)
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
Reduction in Consumer Tax Burden of $2,225 M and Increase in Govt. Spending of $2,781 M
Increase in Consumer burden of $2,225 M
Increase in Govt. Spending of $2,781 M
BILLIONS OF 1996$
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Summary and Conclusion:
Recalling a Basic Economic RelationshipsGDP = Investment + Personal Consumption
+ Government Spending + Net Exports
While an INCREASE in industry (TAX EXEMPTIONS) or consumer taxes rates will:
1. INCREASE PRODUCTION COSTS AND SLOW the economy:
2. DECREASE CONSUMER SPENDING AND SLOW the economy;
3. BUT INCREASE GOVERNMENT SPENDING AND INCREASE the economy.
CONCLUSION:A general sales tax increase spread across all consumers and
industries with an approximate 20% COLLECTION RATE FROM TOURISTS EXPORTS A LARGE CHUNK OF THE TAX and results in continuing to STIMULATE AND INCREASE the economy despite the dampening effects on Florida residents and industries identified above.